A World of Abundance Where Humans Consume Less?

In “The Zero Marginal Cost Society,” Jeremy Rifkin argues that, within 50 years, technology will have developed to the point where there will be virtually no more jobs, where the marginal cost of everything will be zero and where capitalism will cease to exist. There are so many problems with this analysis that it is hard to know where to start, says Robert Atkinson. Productivity growth rates are low; corporate profits are up; wages are stagnant; and the marginal cost of producing virtually most goods is not anywhere near zero. Faddish accounts of how technology will either save us or immiserate us are great for book sales, but don't tell us much about the future.

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Techno-utopianism seems to be a particularly American phenomena. As I argued in The Past and Future of America’s Economy it seems like about every half century – usually as it turns out right before a big structural slowdown of technological innovation – pundits and scholars start to go overboard on how great the techno-enabled future will be. Case in point was the 1967 book Year 2000 written by Herman Kahn, noted futurist and founder of the Hudson Institute. Kahn relied on the new “science” of forecasting and ended up with a book that had the tone of “you ain’t seen nothing yet.” He wrote:

This seems to be one of those quite common situations in which early in the innovation period many exaggerated claims are made, then there is disillusionment and swing to over conservative prediction and a general pessimism and skepticism, and then when a reasonable degree of development has been obtained and a learning period navigated, many – if not all – of the early ‘ridiculous’ exaggerations are greatly exceeded. It is particularly clear that if computers improve by five, ten or more orders of magnitude over the next 33 years, this is almost certain to happen.

The reality was that computers improved by many more than ten orders of magnitude, and yet his predicted level of productivity automation did not happen. Indeed, productivity rates were about one-third of what Kahn had predicted.

But at least Kahn was only off by a factor of two, instead of a factor of five or ten or more, which describes where today’s techno-optimist predictions are likely to be. Indeed, it’s become de rigueur for authors claiming to be futurists to extol the coming technology wonders that are in store for us, painting a utopian (or depending on their view, dystopian) picture where technology proceeds exponentially and transforms the world.

The latest entry to the techno-utopian club is Jeremy Rifkin’s The Zero Marginal Cost Society. Rifkin is a longtime social critic who doesn’t like oil, beef, biotechnology, or much else. However, now, not just content to mirror the flawed arguments in Abundance and Second Machine Age, Rifkin raises them, and not just a little, but well beyond them. For Rifkin argues that within less than 50 years, technology will have developed to the point where there will be virtually no more jobs, where the marginal cost of everything will be zero and where capitalism will cease to exist. Besides that, not much will change. But this is a Rifkin staple: every year or two he publishes a book, each one more grandiose and provocative than the one prior.

He goes on to claim that “The Internet of Things is already boosting productivity to the point where the marginal cost of producing many goods and services is nearly zero, making them practically free. The result is that corporate profits are beginning to dry up, property rights are weakening, and an economy based on scarcity is slowly giving way to an economy of abundance.”

There are so many problems with this analysis that it is hard to know where to start. Productivity growth rates are actually pretty low over the last five years; corporate profits are up, not down; wages are stagnant, not abundant; the marginal cost of producing virtually all goods is not anywhere near zero. Besides these nits, Rifkin nails it.

In the book he argues, “the marginal cost of human labor … will plummet to zero … as technology substitutes for labor in every industry and professional and technical field.” Rifkin goes even farther than Brynjolfsson and McAfee, arguing that human labor will disappear in the next two generations. But assuming that this is true, it would require an annual productivity growth rate of at least 10 percent a year for 50 years (and not much increase in per-capita living standards). To put this in perspective, U.S. productivity growth has averaged around 1.5 to 2 percent a year for the last 100 years.

Not only will we not have any jobs, but we won’t have any businesses either, because when goods and services become free (because the marginal cost is zero) “profits dry up, the exchange of property in markets shuts down, and the capitalist system dies.” Sounds like it's right out of Marx’s The Communist Manifesto.

Besides getting it wrong on all the big things, Rifkin gets it wrong on many little things. Like how he perpetuates an urban myth, first reported (incorrectly) by The Washington Post that the FCC was planning on creating a free national Wi-Fi network: “In February 2013, the FCC dropped a bombshell. The commission published a proposal that would create ‘super Wi-Fi networks’ across America, making wireless connection free for everyone.” He seems to think that the FCC’s TV spectrum incentive auction is going to be 100 percent used for unlicensed Wi-Fi that we can all get without paying anyone. Too bad the story was completely wrong. Likewise, he repeats the urban myth that “even China shed 16 million manufacturing jobs.” Wrong. Then, he writes that in 2009 the US government gave up its oversight over ICANN. Again, completely wrong; the U.S. government announced only this year that it was considering ending its oversight of ICANN.

If we are poised for an economy where virtually everything is free, won’t that mean environmental stresses? Rifkin has long been an advocate of environmental sustainability and a low-carbon economy. How can he square the circle between an economy of abundance where virtually everything is free and a sustainable planet? Hmm, let’s see. I have it. Why not argue that in an age of abundance and free goods people will consume less, not more. Why is that? It’s because “scarcity breeds overconsumption … In a world where everyone’s material needs are met, the fear of going without is extinguished.” Ah, now I understand. The reason I strive for that new custom-built carbon-frame bike to commute to work and to fly in business class on all my flights (because I am 6’7” tall) is because of my fear of going without. If the bike and the business class flights were free, I’d stick with my old poorly fitting off-the-rack bike and middle seat in coach. Besides, Rifkin argues, “the accumulation of wealth is an albatross … each additional foray into this hedonistic fantasy brings them more unhappiness, pulling them ever downward in vicious cycle of addiction from which there is no escape.” Problem solved; we can have free goods and services without stressing the planet, because free means we will consume less, not more.

Given that Rifkin must be pulling down really good money from his speaker’s bureau speaking gigs (when you have to inquire about someone’s speaking fee, it usually means it’s really high), he must be deep into this unhappy fantasy. Jeremy, maybe I can help you out of your hedonistic addiction all this money is locking you into. I will send you my bank account number to which you could deposit your speaking fees. I don’t mind my hedonistic addictions, and I want to help you overcome yours. Win win. And we can do the exchange electronically so it will have zero marginal cost. Also, by the way, why do you even charge for your speeches if the zero marginal cost is zero? And why do you have a for-profit company represent you if the “Collaborative Commons” is replacing capitalism?

At some point readers will tire of such bunk and publishers will move on to the next intellectual fad. But for now, this kind of techno-utopianism is more than just annoying; it’s downright harmful, for two key reasons. First, it terrifies most people. If you believe that within a generation or two there will be mass unemployment, with humans consigned to the dustbin of history, you probably want to slow things down a tad. Second, even if you like a future of massively higher productivity growth (count me in), this vision makes everyone a passive bystander. Don’t worry, techno-determinism will do all the work. We don’t need tax policies, like first-year expensing, to spur more investment in IT-enabled machines. We don’t need more government support for R&D for productivity-enabling technology; it will all just happen on its own.

Robert Atkinson is president of the Information Technology and Innovation Foundation, a public policy think tank in Washington, DC. This article originally appeared on The Innovation Files blog, and is reprinted with permission.